Editorial: To Hit Our Targets, First Help Ourselves

With the state budget targeting economic growth of 6.5 percent for Indonesia this year at the same time as Europe’s crisis deepens, the US recovery slows and China’s economy weakens, it was never going to be easy to meet that figure.

On Thursday, Finance Minister Agus Martowardojo made it more or less official, saying the various global crises would likely slow demand for exports and take the steam out of Indonesia’s growth target. Already numerous analysts have predicted that Indonesia will grow by perhaps 6.1 percent this year — healthy, but a warning sign that it has to remain competitive and stay the course on numerous policies.

“The global crisis is making competition tighter, and the impact will be that our goods may not be absorbed by the global market if we cannot improve our competitiveness,” Agus said on Thursday.

Among other things, this means the government has to work harder to spend the state budget wisely on crucial projects that help the economy. We can no longer afford to hold back on spending budget allocations for infrastructure that help the country keep its edge. We also have to send consistent policy messages to foreign and domestic investors or we risk chasing them away and dampening the robust sentiment of recent years. The recent flip-flop on a proposal to tax coal exports is an example of such policy confusion in a crucial sector.

With Indonesia’s strong domestic consumption and high consumer confidence, the country has been able to skate through much of the global economic turmoil of the last four years. But we are not an island that is immune from the problems facing an interconnected world. Now is the time to send consistent messages, enhance infrastructure and remain open and welcoming to foreign investors.